I-1030: Stupid is as stupid does

I sure had my fun at Kirby Wilbur’s expense yesterday, pointing out the rather amusing flaw in the language of the new tax cutting initiative he’s promoting, which ends up slashing property taxes by an astounding 99.4 percent, rather than the mere 30 percent reduction he promised his KVI audience.

To be fair, Kirby emailed me to explain that the text of the initiative was written by Floyd Brown and Wynn Cannon, adding “I favored a different approach when asked.” If that different approach includes a revenue-neutral property tax homestead exemption or circuit breaker, I’d be happy to join him in a bipartisan crusade for tax fairness. I genuinely like Kirby, and I think we’d make a great team.

That said, I think that the text of Initiative 1030 offers a textbook example of the follies of our initiative process, and of our Republican tax-cutting crusaders in general, for if you don’t understand the difference between, say, an “assessed value” and a “property tax,” then you really have no business rewriting our tax code.

For example, while I-1030’s unfortunate miswording may provide the initiative’s most amusing flaw, it is far from its most fatal, for though virtually eliminating the property tax altogether without offering an alternative revenue source would be a public policy disaster, it is not technically unconstitutional. The means by which I-1030’s authors seek to do so however, is.

The assessed value of property for all privately owned real property must not exceed the property tax on the same property for the tax year ending December 31, 2008, reduced by thirty percent. The reduction provided in this subsection may not shift property taxes. The regular levies of all taxing districts shall be reduced as necessary to prevent the values exempted under this subsection from resulting in a higher tax rate that would have occurred in the absence of the reduction.

Ignore for a moment the comical miswording that sets the “assessed value” to the “property tax” less thirty percent (I assume they mean to set it to the assessed value less thirty percent), and the vague, pseudo-legal mumbling about not shifting taxes. The intent of the initiative is to reduce the assessed value of all parcels of real property to 2008 levels less 30 percent (or, 99.4% as the case might be), and then freeze them at that assessed value “thereafter.” The problem with this approach (other than that it is just plain dumb policy) is that it clearly violates the uniformity of clause of Article VII, Section 1 of the Washington State Constitution: “All taxes shall be uniform upon the same class of property…”

Since the “fair value” of different properties rise (or fall) at different rates, I-1030 would immediately violate the uniformity clause, providing an effectively lower tax rate on fast appreciating properties than on those whose fair value has appreciated at a slower rate, or even declined. This is an issue that has already been well adjudicated by the courts, and any serious tax cutter would never have pursued this approach had he done his homework.

I-1030 also neglects to note that “real property” consists of both the land value and the improvements upon it (you know, like your house or a 50-story office tower) and thus fails to address the thorny issue of how its provisions apply to new construction. Either new construction is assessed at fair market value while all other property remains at 2008-less-30% levels—a clear violation of the uniformity clause—or, assessed value of all parcels remain frozen in time in perpetuity, regardless of the huge disparity in the value of improvements subsequently made upon them, which is also a, um… clear violation of the uniformity clause.

Not to mention, just plain stupid.

This kind of amateurish legislative hackery is actually typical of initiatives of this ilk, which explains why so many of Tim Eyman’s measures have ended up being thrown out by the courts. But I-1030 is worthy of fisking despite its laughable language and its fatal congenital defects, because it is crap like this that routinely manages to distort the public debate on property tax reform in the absence of substantive proposals from the Democrats in Olympia.

Coming up, I-1030’s authors’ ignorance of our tax system and the laws that govern it is illustrated further by a critique of the initiative from a policy perspective.

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As an Illinois state Senator, Barack Obama received more than $100,000 from a company owned by an entrepreneur whom Obama helped to obtain a state grant. Robert Blackwell Jr., a contributor to Obama’s campaigns, began paying Obama an $8,000-a-month retainer in early 2001 to provide legal advice to his technology firm, Electronic Knowledge Interchange. At the time, Obama had recently completed his unsuccessful campaign for Congress, and had numerous debts and a law practice he had neglected for a year while campaigning, the Los Angeles Times reported. Obama had been so strapped for cash that his credit card was initially rejected when he tried to rent a car at the 2000 Democratic convention, Obama disclosed in his book “The Audacity of Hope.” The monthly payments from EKI supplemented Obama’s $58,000-a-year part-time state Senate salary, and eventually totaled $112,000. “A few months after he received his final payment from EKI, Obama sent a request on state Senate letterhead urging Illinois officials to provide a $50,000 tourism promotion grant to another Blackwell company, Killerspin,” the Times story disclosed. Killerspin runs table tennis tournaments around the country and sells its line of equipment and apparel, along with DVD recordings of the tournaments. The day after Obama wrote his letter urging that Killerspin receive the grant, Blackwell contributed $1,000 to Obama’s Senate campaign. Killerspin eventually received $320,000 in state grants between 2002 and 2004 to subsidize its competitions. Blackwell is credited on Obama’s Web site with committing to raise $100,000 to $200,000 for Obama’s presidential campaign. According to the Times, Obama did not specify on disclosure forms for 2001 and 2002 that EKI provided him with most of his private-sector compensation.

Speaking of Mr. Eyman…I’m surprised (or maybe I just didn’t catch it) that nobody here has made mention of Tim’s sob story in this morning’s Pea-Eye about how he’s hocking his house (right now, how desperate/dumb can you get?) to support his latest initiative campaign because his long-time benefactor’s a little short on cash.

It seems the Treasury has lowered the base rate on I-bonds…to zero! So, BushCo has cut our taxes, but now they want us all to loan our money to the gubmint for nothing so they can keep murdering Iraqi babies and bailing out crooked bankers.

Word is that we might get some of the truth about Flip Flop McCain’s ties to lobbyists that gained from his wife’s influence. Also – holding out hope for the US District Court case that would force POW documents to be released showing McCain is a traitor who gave up US servicemen to save his own skin.

@4 If I-bonds pay interest equal to the rate of inflation, that’s better than most investments and far better than bank CDs, which currently pay about 2%.

I’m sure that when America’s senior citizens vote this fall, they’ll really appreciate the fact that under Republican ecoomic policies, their income on their retirement savings is less than the rate of inflation.

First of all, many of them have seen their retirement income gutted by the GOP’s bankruptcy “reform” that allows corporations to default on their pension plans. (Somehow, these companies don’t actually go bankrupt, but stay in business and even continue paying huge salaries and bonuses to their executives.) For example, some airline pilots (who are forced to retire at age 60 even if they’re in perfect health) are collecting about 30 cents on the dollar of the pensions that were promised to them.

Second, retirees who lack solvent defined benefit pension plans and depend on 401(k)s, IRAs, Roths, etc., are seeing their hard-earned capital get eroded by investment returns so low they’re not even making up for inflation.

Third, the core expenses of most retirement budgets — food, medical care, medicines, local taxes, etc. — are rising at many times the official rate of inflation (which is bullshit to begin with). Some food staples, for example, have risen by 30% to 60% over the last two or three years; and food prices in general are zipping upward at a double-digit annual pace. Meanwhile, retirees are losing ground in the stock market and getting a 2% return on insured savings.

It is against this backdrop that we should evaluate Republican claims that retirees will be better off if we replace social security with “private investment accounts.”

Compare:

Social security has paid every penny of promised benefits on time since 1938 versus corporations scrambling to declare bankruptcy in order to void their pension obligations;

Social security’s guaranteed and inflation-adjusted benefits versus the recent performance of investment markets and the current return on money market funds, bank accounts, and CDs;

The safety of Social Security’s funds which are 100% invested in Treasuries versus the endless schemes hatched by Wall Street wizards to separate people from their savings (derivatives, SIVs, mortgage-backed securities, etc.).

The reality is Republicans want to get their claws on Social Security’s trillions so they can steal it. The reality is Republicans want you to invest your retirement money in financial schemes run by them so they can steal it. There is no difference trusting Republicans with your retirement savings and entrusting them to a mob boss, because the end result will be the same: Your money will end up in their pocket and you will have nothing to show for a lifetime of struggle, thrift, and hard work.

@6 Absolutely nothing was done about the viaduct — and I mean nothing, not even talking about it — during the 10 years that Republicans controlled the state senate and blocked all transportation spending while our highways, bridges, and ferries rotted away.

What Republicans like Wingnut Hannah and Ken Schram miss is that government is partly about process. Democracy isn’t designed to produce quick or expedient decisions; its purpose is to let everyone participate and have a say in public actions that will affect them. Maybe Ken Schram orders his secretary to make coffee for him, but government doesn’t work that way. And it shouldn’t. I don’t care for top-down government; I like the bottom-up kind.

Rabbit man, Ken Schram is very much a democrat, every now and then he mocks our democrats, but he is very much liberal! And all I was pointing out is his reference to Ex-Lax. He was hilarious! We all know he has a point in the fact we haven’t accomplished anything when it comes to AWV plans, now we have 10 to choose from after how many years?

And the $$ definately should be there as that was main reason behind the emergency 9 cent gas tax!

Simple solution to property taxes: base the value of the property at the original purchase price, add the cost of improvements (like adding a room, etc.) and use that value (for that owner) as the base for computing the property’s tax.

And never increase the property’s value as long as it’s owned by the same person(s).

17 Mr. Schram seems to express amusement whenever he’s accused of being either a “conservative” or a “liberal”, which I take to mean that he considers himself to be neither.

I agree his proposal is funny. It should however be expanded to sending packages of Ex-Lax to not only the Governor, but to all members of the Legislature, the upper-level managers at the WSDOT, our esteemed mayor, county executive and members of the city and county councils. There definitely is a characteristic “Seattle-itis” syndrome in infrastructure planning here, in which things are studied to death but nobody wants to put a stake in the dirt, pick a plan and go with it for fear of offending one interest group or another. That’s why we’re struggling to complete the first phase of Sound Transit’s light rail, destroying the evidence there was ever a Monorail project and sitting on the viaduct, the eastside rail corridor and a dozen lesser projects, while other Western cities are well into the second or third major expansions to comprehensive transit systems they’ve had in place for ten years or more.

What we need to prevent this mess from happening again is to bring back some sort of sanity to the financial industries to prevent the housing market from being transformed into a gigantic Ponzi scheme.

Of course, to do so would–horrors!–prevent an irresponsible administration to use the illusion of prosperity as a cover for robbing not only us, but the next three or four generations of our offspring.

@22. That isn’t what you originally agreed would be a good idea; and in addition, if you apply the tax to the seller then how is that different in theory from raising the assessed value every couple of years? You still get screwed if you need to sell – and given the climate right now, would cause even more people to jingle. Do you even think of the consequences of something if it sounds good to you at first hearing?

Iraq’s prime minister has sent a delegation to Tehran to tell Iranian officials to stop backing Shiite militias, Iraqi officials said on Thursday, underscoring Baghdad’s unease over the influence of its powerful neighbor.

Yeah, the Badr Organization that is the militia behind Nouri al-Maliki’s coalition government (that militia and US troops are the only thing keeping him in poiwer) was founded and is funded by Iran’s Revolutionary Guard Quds.

Oh, and one of my friends went to high school with with Kirby Wilbur. My friend is Queen Anne High class of ’72. He tells me Kirby used to go out and steal all the campaign signs from people backing local Democrats. Stand-up guy, that.

I would totally oppose such a change unless we start funding education in a totally different way, or unless other changes made such a change revenue-neutral. Otherwise our public schools would suffer greatly.

28 People who blather about “tax reform” are really talking about tax elimination, at least for themselves and their own posse. Either they’re working under some delusion to the effect that they don’t need any of the infrastructure and services of an organized society, or they consider themselves somehow more worthy than their neighbors, so they have no problem leeching off the benefits someone else pays for.

13. Roger Rabbit spews: @6 Absolutely nothing was done about the viaduct — and I mean nothing, not even talking about it — during the 10 years that Republicans controlled the state senate and blocked all transportation spending while our highways, bridges, and ferries rotted away.

So Rog– Exactly what bills did the Democratic House Propose that those mean Republicans blocked???

What did the Democratic Governor’s ask for in their Budgets that the mean Republicans chopped out??

23. ArtFart spews: “What we need to prevent this mess from happening again is to bring back some sort of sanity to the financial industries to prevent the housing market from being transformed into a gigantic Ponzi scheme.”

Kind of like the Clinton/Gore Dot.com scheme with inflated Dot.Com prices that collapsed and lead to many folks losing their retirement funds?? You can’t have it both ways. Dot.com bubble was what you KLOWNS ignore in praising Clinton for our “prosperity”?? Fortunately, I missed that collapse personally. I was investing in solid, dividend paying companies!! Not pie-in-the-sky Clinton/Gore BS.

31 Cynical You’re right, in that some pretty severe regulation of oil/gas/fuel, internet, and financial services companies was needed to prevent the problems we saw in 2000. If only those Democrats in Congress had done something! Oh, wait…it was the Republicans who ran Congress from 1994 to 2000. Hmmmm Well, they almost passed a flag-burning amanedment. I guess that counts for something.

The only things Clinton and Gore had to do with the “high tech” bubble were:

(1.) To try and take some credit for it, which was silly.

(2.) To refrain from squandering the spike in tax revenue that accrued from it, which in retrospect was pretty damned smart. Oh, except that the next occupant at 1600 Pennsylvania Ave. blew it in a heartbeat. Along with blowing just about everything else but himself.

The instability in the markets that has led not only to the last two bubbles but their inevitable collapse is directly due to the systematic carving away of the regulatory structure that was put in place after 1929, driven by the neoconservatives and the gutless me-too Democrats who’ve found it easier and more profitable to go with the flow than to try to patch the holes in the ship and persuade anyone to start bailing.

Now we’re faced with the very painful revelation that the “wisdom of the marketplace” is a crock of shit. An unconstrained marketplace is no wiser than its most foolish participant.

Shramm has been around for a couple of decades in various roles, all of them bad. I gave up on TV about 5 years ago. I get the few good programs that are out there: The Wire (RIP), Foyles War (RIP after this season) from Net Flix and watch Front Line online.

18, 19: The “fixed assessment” idea is the basis of California’s Prop. 13, which I think was passed around 1977 or 1978. You can still see the affects of that initiative in California.

As I mentioned in another post today in another thread, one of the consequences of such legislation is that seniors get trapped in their houses – they can’t afford to downsize because they would lose the tax advantage (subsidy) they receive by staying in the house they have owned for ages. Other residents choose to commute long distances to new jobs rather than lose the tax benefit they get from living in a house for many years.

This serves to artifically reduce the number of houses which would otherwise be available, and is cross-purposes against what is generally public policy against anything which acts to restrict the buying and selling of housing (known as a “restrainy on alianation”). By carving out a portion of the market which will be off the market, that drives up prices on the remaining homes which are on the market. Also, the actual tax rate on assessed value rises, because you have to make up for the loss of revenue somewhere. In short, you have the young, or those new to the state, or those who are forced to buy for some other reason, paying a much higher share of taxes than those who’s only distinguishing characteristic is that they have stayed in one place for a number of years.

The other consequence of a Prop 13 type initiative is that is disproportionately benefits commercial properties that are held for an extended period of time by the same owners. You think that Boeing wouldn’t mind being taxed on an early 20th century value for all of their properties?

Let’s say John and Jane Doe bought a house in 1975 for $60,000 which is now worth $400,000. Back in ’75 they were earning $1,500 a month but now they make $135,000 a year.

Now, 30 years later, along come a young couple named Sam and Sally Roe. They buy the identical house next door for $400,000. They make $70,000 a year. But their property taxes are 666% more than what their next door neighbors, the Does, pay even though their house is worth the same and, being younger, they have less income and more expenses (e.g., children living at home). How the fuck is that fair?

Another problem with that property tax system is it discourages people from selling their homes. If you sell and buy another house, your property taxes will increase drastically. So, people turn down job offers or promotions, and they never sell their houses, instead giving them to their kids or renting them out when they can’t live in them anymore. This dries up the real estate market and drives up prices.

@20 The reason there isn’t a monorail is because the people who voted for it never intended to pay for it and voted against it after the legislature closed the loophole that enabled them to dodge the monorail tax.

@45 – so when the Shrammie got handed to Tim Eyman, did you yell foul then too? Hypocrite! At least his note to the gov was funny as hell and very sarcastic, where as to Timmy is was dead f’in serious.

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